Safeway Puts Steak Before Sizzle
Safeway was an easy target. It acquired businesses (Randalls, Dominick’s, Genuardi’s) and drew immediate criticism for changing the very aspects of those stores that made them desirable for purchase in the first place.
By 2002, it became clear to Safeway management that its plan for the acquired businesses, along with the stores it started out with, was simply not working.
“We needed some fundamental changes,” said Steven Burd, chairman and CEO of Safeway. “We [needed to] differentiate our offering from other conventional supermarkets.”
Safeway’s answer to setting itself apart came in the form of its “Lifestyle” format. Starting in 2003, Safeway began a six-year program to remodel all of its stores to the tune of $1.6 billion a year.
Importantly, Safeway chose not to play up all the changes it was making to consumers. Instead, the company waited until the Lifestyle reformatting program was well underway and consumers had voted with their dollars as to whether they liked the changes.
Safeway had chosen to put the steak before the sizzle or to try, as BusinessWeek described it, “authentic marketing.”
For those not familiar with the term, the magazine defined authentic marketing as, “Deliver what you promise.”
“We were very careful not to talk about quality until we had stepped up quality,” said Burd.
Once Safeway decided it had a story to tell, the company launched a $100 million plus ad campaign to drive consumers into its new and significantly improved stores.
Discussion Questions: What is Safeway’s Lifestyle format and advertising campaign’s role in contributing to the chain’s turnaround? What other factors
have enabled Safeway to improve its business results?
Safeway gets it. Their new stores are more Whole Foods than a typical ol’ Piggly Wiggly and their solid new private label products and Blackhawk marketing think are breathing life into the machine. Add Albertsons shrinkage and a lack of good new sites in their key markets makes Safeway a long-term winner.
Safeway still has its challenges, and as the market changes and consumer’s demands change they will still have to adapt. However, to look at Safeway now as compared to just a few years ago, it’s easy to understand why they’re well on their way to turning things around and establishing a success model for the future. I agree with BusinessWeek in saying that Safeway has delivered first before they started bragging about their accomplishments, and much to the surprise of most shoppers, they’re delivering.
I live in Central California, where Safeway’s local presence comes in the form of Von’s stores. Several months ago they rolled out a remodel of the Von’s where I shop, and it is fantastic! Not only did they manage to make the store feel calm and inviting, but the substance is there, too. This area had virtually no organic food choices outside of a small, expensive local natural foods retailer, and between a pretty good organic produce section and Safeway’s O Organics line, they’ve hit the mark with those of us who deeply care about what we eat but are financially squeezed by California’s ridiculous housing costs. Safeway’s gained the loyalty of my friends and family because they really have delivered what we need and want.
Safeway’s Lifestyle format and subsequent advertising campaign are truly unique and much farther reaching than a typical repackaging or remodeling endeavor.
I must give Steve Burd the lion’s share of the credit. Mr. Burd did what most other CEOs are reluctant to do and that is to approach the entire repositioning of the Safeway brand and in-store experience in a holistic fashion. This was not simply crafting a few new advertising catch phrases and installing a new décor package — far from it. Months and months of strategic thinking went into determining the strengths and weaknesses of their existing product mix, store layout, merchandising techniques, SKU rationalization, category management, private label programs and so on. Every category manager, buyer, store planner, and marketing team was involved in the process; many toes were stepped on, lines were crossed and territories were invaded, leaving no stone unturned.
Too often, especially in grocery retailing, store design/planning, advertising, category management and operations are all separate departments that never seem to communicate, let alone work together to create a consistent and successful shopping experience for their customer. While Safeway also had these divisions, they were called together and challenged to put the future of Safeway first and their egos second. While the environment may have been uncomfortable at first, after some time, by and large most got on board and created a store format that was integrated, customer centric and worthy of the Lifestyle name. Mr. Burd was always careful to make sure it happened in the store first, in reality, and then market those features as to ensure there would be no disappointment once the customer stepped into the store.
While to some observers it may seem that the Lifestyle format is no more than a remodeling program, one which many of their competitors may try to replicate, it is far more. And so I feel that as long as the strategy behind the Lifestyle format remains intact — in other words, as long as the changes and improvements in the proper category management, cross merchandising techniques, and operational structure that Safeway has made do not recede (leaving this as no more than a physical remodeling program), it will continue to be successful.
I don’t know as much about this as the rest of the grocery industry pundits, but it seems to me we are witnessing yet another round of lemming-like behavior.
With the possible exception of SuperValu (good for you Jeff Noddle), most of the large chains have adopted almost identical strategies to insulate themselves from the big, bad Wal-Mart devil. How is the Safeway Lifestyle format very different from Kroger’s? How can the entire industry move “upscale” simultaneously? Am I missing something? So the answer to the looming dominance of Wal-Mart is to abandon the playing field, find less competitive pastures, and by doing so, create intense competition in a niche which won’t sustain it.
Seriously…if there are a number of competitors in this niche, all providing upgraded shopping environments, better strategic product assortments, increased customer service, etc….won’t they be forced, eventually, to also compete with each other on price? Or, continue to out-do each other with more and more improvements, upgrades, etc.? Where’s the economic viability of this?
Safeway stock is around $30 today. Five years ago it was $40. They’ve shown progress recently (the stock was only $20 two years ago and $25 a year ago), but they have a long way to go. Safeway has shown that retailer revitalization can take a very long time. Not all retailers have the time or the leadership needed.
At the newly remodeled Dominick’s here in the city of Chicago, sales are surging at the stores.
The remodels have been heavily promoted and large grand opening sales have drawn in people to the new Lifestyle stores.
Unlike a few years ago, Dominick’s billboards are now popping up all over town with the lifestyle graphics. This is ahead of Jewel, who does not advertise on billboards for the most part.
Safeway has brought back many of the trademarks of Bob Mariano’s Dominick’s Fresh Stores, from prepared meal offerings to bold graphics and displays. The produce departments with hundreds of spotlights have been the talk of the town with their elaborate produce displays.
Safeway has also made customers feel more valued, by randomly selecting people for promotional offers. Myself, I received 15% off all my groceries for an entire month and a half by using my Fresh Values card. I heard someone randomly got their whole order free.
Many consumers here feel that Dominick’s/Safeway once again cares about the customer. In fact, employee morale at the stores seem to be up. Probably because they finally settled on the labor dispute.
I find that the Lifestyle concept is far dramatic improvement from the blase vanilla box Safeway stores from the late 1900’s, early 2000’s with the exposed lamp strip lights and green and yellowish blah graphics.
Someone really got the lighting right at the new Lifestyle stores and now the feel is very upscale!
I think Safeway’s turnaround is more fiction that fact. Even if these remodels result in a 25% increase in sales, it only gets the stores back to their previous level, and perhaps not even that much. Plus they had to invest a lot money just to get back to where they were. Most of the bold talk seems to be coming from Safeway management. The competition doesn’t seem to be losing any sleep over this. Safeway is just experiencing a normal amount of sales increase that any store would get with a major remodel. In my opinion, Safeway will eventually be pressured by Wall Street to raise prices, cut labor, and consolidate in order to increase share price. At the same time, the competition is remodeling their stores as well, which only raises the bar for plain vanilla grocery stores. If in fact Safeway is experiencing some forward momentum, it’s only temporary.
To me, the campaign is very smart — Safeway (Vons, etc.) is about your life and lifestyle now rather than groceries! That is definitely an important hook for consumers. Whether their stores do make life easier will be critical as they move forward. My reaction to the changes is definitely mixed. I hope the change process is not complete. If it is, then they have made a valiant attempt but missed the boat. If they are in process and continue to monitor the lifestyles of their consumers and respond, then it could be very successful. If they are in the middle of the journey, then they deserve credit for making the change and for their effort so far.
Who would know the answer? Mr. Burd admits mistakes up front, that a ‘true’ consumer marketing approach to the business would catch and address, first. Then comes focus groups; added quantitative research; written test plan; employee meetings and education programs; and implementation.
Measured and obtained objectives being favorable leads to regional/divisional roll-out, and monitoring.
Did Safeway do the above steps for its ‘Lifestyle’ stores, or any businesses that it bought, like the old Dominicks Fresh Stores and Publix did?
Questionable……
Mistakes, and not listening to shoppers, really rack up expenses. How much EBITDA is gained in our industry? Time to adjust the model. Hmmmmmmmmm